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Analysis of house prices in Spain

  • Jorge Martínez Pagés


    (Banco de España)

  • Luis Ángel Maza


    (Banco de España)

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    House prices in Spain have shown one of the biggest cumulative growth rates among the OECD countries over the past five years and, indeed, over a more extensive period. This paper focuses on analysing this development and its possible determinants. The evidence provided suggests income and nominal interest rates are pivotal explanatory factors, although equity returns may also have been influential in the final years of the sample. According to the estimated models, house prices are currently above their long-term equilibrium level by an amount not unlike other times in the past. Therefore, something of a correction –of an intensity difficult to estimate but not necessarily sharper than in past episodes– may be expected in the future.

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    File Function: First version, June 2003
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    File Function: First Spanish version, June 2003
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    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0307.

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    Length: 45 pages
    Date of creation: Jun 2003
    Date of revision:
    Handle: RePEc:bde:wpaper:0307
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    1. Meen, Geoffrey, 2002. "The Time-Series Behavior of House Prices: A Transatlantic Divide?," Journal of Housing Economics, Elsevier, vol. 11(1), pages 1-23, March.
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    5. Muellbauer, John & Murphy, Anthony, 1997. "Booms and Busts in the UK Housing Market," CEPR Discussion Papers 1615, C.E.P.R. Discussion Papers.
    6. Englund, Peter & Ioannides, Yannis M., 1997. "House Price Dynamics: An International Empirical Perspective," Journal of Housing Economics, Elsevier, vol. 6(2), pages 119-136, June.
    7. Stephen Malpezzi, 1998. "A Simple Error Correction Model of House Prices," Wisconsin-Madison CULER working papers 98-11, University of Wisconsin Center for Urban Land Economic Research.
    8. Ortalo-Magné, François & Rady, Sven, 2005. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraint," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 50, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    9. Jeremy C. Stein, 1993. "Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects," NBER Working Papers 4373, National Bureau of Economic Research, Inc.
    10. Wheaton, William C., 1974. "A comparative static analysis of urban spatial structure," Journal of Economic Theory, Elsevier, vol. 9(2), pages 223-237, October.
    11. Kenny, Geoff, 2003. "Asymmetric adjustment costs and the dynamics of housing supply," Economic Modelling, Elsevier, vol. 20(6), pages 1097-1111, December.
    12. Juan Dolado, 1999. "A Cost-Benefit Analysis of Going from Low Inflation to Price Stability in Spain," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 95-132 National Bureau of Economic Research, Inc.
    13. Dougherty, Ann & Van Order, Robert, 1982. "Inflation, Housing Costs, and the Consumer Price Index," American Economic Review, American Economic Association, vol. 72(1), pages 154-64, March.
    14. Holly, Sean & Jones, Natasha, 1997. "House prices since the 1940s: Cointegration, demography and asymmetries," Economic Modelling, Elsevier, vol. 14(4), pages 549-565, October.
    15. M.M.G. Fase, 2001. "Investments in Painting: The interaction of monetary return and psychic income," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
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